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tv   Today in Washington  CSPAN  September 11, 2009 6:00am-7:00am EDT

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risks, all of those measures are dramatically lower, and that is the fair way to capture the return on these investments. you have to look at these things with the 18% return on the advantage. >> this is part of the return on ending the program? >> part of this, there is no perfect thing that is here. if you commit to doing enough, you make that credible to people. you will not be behind, always chasing the crisis. you will be more likely to solve this at a lower cost. if you pull this back, this will be more expensive. that is the basic essential design of the effective strategy in the crisis. >> superintendent? >> the new treasury report on the mortgage modification represents an important step in the accountability.
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this also confirms in a report that was just issued that there are wide disparities among the rates of modification. . . firms have not started any trout modifications, while many more have rates in the low single digits. you how to import the meeting on july 28 to discuss these very issues -- you held an important meeting on july 28 to discuss these issues. the report that was just issued shows that there are tryout shows that there are tryout modification started around these would indicate really only about 12% of estimated eligible borrowers. the secretary indicated that servicers have committed to increase that number to a total of half a million modifications by november 1.
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based on the benchmark of reaching 3 million to 4 million, are you satisfied we are on that track? have we set realistic expectations? is the real risk and challenge in converting those trial modifications to permanent, sustainable modifications? >> it is not enough to send out $1.8 million in solicitations and modifications. it is not enough that you have something like in the close to half a million offers extended, it is not enough that you have more than 350 million households benefiting from substantial reductions in interest rates. we are very focused on making sure this program reaches as many eligible homeowners as possible. two important things to point out. it is very helpful to do what we
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just did it, to put in the public domain of every month that allows the american people to see how many banks it is reaching. i am quite confident that can produce much faster modifications much more quickly because institutions do not want to live with the consequences of being so far behind the curve of what is possible in helping families get through this exceptional set of problems. we are making sure that we are going in after the fact and looking at whether people are denying eligible homeowners access to modifications. there is a second look program, which is a program of auditing to make sure they are not the ninth eligible homeowners the chance to participate. i think this is going to reach a substantial share of people who are eligible, but it is
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important to recognize that this was just one part of a set of actions that we took to bring down mortgage interest rates. this actions looked in total has helped bring mortgage rates to low levels and have helped bring a measure of stability to housing prices, housing activity faster than many economists had forecast it. fundamentally, it is that broader measure which should be the ultimate test of this program. >> i would be interested in your comments about the obstacles of increasing the effectiveness of participation. what we are hearing and talking with servicers, there is still concern about our reach, getting documentation back from them. some creative approaches is that people are not responding to going out physically and visiting. i would like to thoughts on other creative approaches. i have suggested possibly
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letters from yourself or the president of the united states to make sure people are opening their mail and realizing this is not just another creditor notification, but a real response from the government. >> we are very pragmatic and won this to work. we will act on any reasonable suggestion. for this to work, people need to take some initiative. they need to find out how to make sure to get help. 350,000 families today have seen a dramatic reduction in the cost of carrying their mortgage in ways that puts more money in their hands. the pace of that curve is very rapid. >> i have 10 seconds left. we will be holding a hearing on
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september 24 in philadelphia on this very issue and we look for support from your office to ensure we have representatives from the treasury, fannie mae, and freddie mac to go over those programs that you referenced. >> a good use of your extra 20 seconds. >> thank you. >> thank you. i would like to return to a point you raised. the stress tests are affectively the tool by which we have measured the strength of the 20 largest financial institutions. that is what gives you confidence, both that we understand the risk of exposure on toxic assets and the overall projections on how stable these institutions are. the worst-case scenario under the stress tests for 2009 projected average unemployment for the year at 8.9%. as you know, the current
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unemployment rate is 9.7%, and the average of the year has reached 8.9%. so, the panel has recommended that under those circumstances, the stress tests be repeated for these financial institutions. does treasury plan to do that? >> i think there is an important thing to start with. the most important thing to look at was the loss rates that were assumed for the worst-case scenario. if you look carefully, as you have done, at the design, the rates that were assumed in the stress scenario or worse than peak losses experienced by this country during the great depression. they assumed roughly loss rates
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rise as much as 9%. we are now more in the 2% or 3% range. losses are running well below that level. earnings are running substantially above the assumptions. >> let me stop there. you are the one who put out what the appropriate details were in the stress tests. >> the fed designed it as you expect. >> but you with the one who advanced it. one of the featured album it was unemployment and we all know that unemployment relate very closely to the level of foreclosures which relates it very closely to the value of the toxic assets. >> the framing constrained in the stress tests was the loss estimates that were applied -- those did not relate to the unemployment forecast.
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>> is not what you advertised matter? >> our assessment was, we put it in the public demand for everyone to see and assess themselves what the loss rates were. >> that raises the question. we would like to be able to rerun the stress tests. i have understood that we would have enough information about how the stress tests are composed, that reasonable people could sit down, build assumptions, and see how the stress tests would come up with these major banks. in fact, we don't have the data inputs. >> i would be happy to remedy that. >> i will take yes as an answer. >> these were an important improvement in the market's capacity to assess risks in these institutions.
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you have seen a substantial amount of private capital come into the financial system. we never said it was sufficient. things could change going forward. i think we have a basis for people to be able to independently assess whether these assumptions were rigorous enough. >> we also ask the question about expanding the stress tests to midsize banks and perhaps even smaller banks in a somewhat modified form. is treasury willing to do it? >> we have said publicly we are not going to conduct a similar exercise bank by bank. >> how about the next 100? >> let me explain what the supervisors have done. what they have done is to apply pretty careful and exacting from work through the supervisory process to the rest of those
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institutions so that we can have a better sense of making judgments. it is not realistic or feasible for us to conduct, for the fed, to conduct the level of detailed assessment for this to be credible for a banking system that has 9000 additional banks. >> thank you, mr. secretary. . .
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i can find no demonstrable metrics for success by the administration. so can you enlighten me? going through again with the testimony and the substantial reports, the fed and financial stability oversight board providing -- i would be happy to do it. but i do not think we are saying is very -- what you're saying is fair. we can see how much money we're spending, but what is happening to boring conditions? one of the most important things we did with the fed was designed
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to provide a backstop of support to the when the markets critical for small businesses, ought to finance, credit card receivables, etc.. and you can see detailed evidence of how much issuance has come with this program, what has happened to the cost, how much is directly funded, as opposed to direct a supported. >> mr. secretary, what you are asking us to do is to draw the cause and effect. have people look at statistics in the economy, but coming from an oversight panel a year, it is hard not to conclude that essentially you have the subjective power to invest $700 billion on a revolving basis on any institution you deem is a financial institution and that any program will be judged as a success if you deem it that after the fact. >> i would not claim that. i would just remind you,
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congressman from the united states divided the authority provided. >> you have the ability under the programs designed to say here are the metrics. >> again, this is the great virtue. you can see now is to return when people repay, the prices relative to market, but you can see directly, program-by- program, what is happening to credit conditions. that is the ultimate test, the great virtue. you can do better than that. >> if what is happening in the markets is the ultimate test, clearly the spreads for the month were incredible back during the crisis in september of 2008. by the time your administration took office, they went down from 300 basis points to 20 basis points. since your administration came into power, they are down to 10, so certainly that is an improvement, but it sounds like
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a lot of this happened from the previous watch. again, i do not know what the cause and effect relationship is. >> is much easier and more clear than most things we try to measure the effect of economic $) in breaking the panic in the fall of 2009. it is also true that almost any measure of financial help for this country, in january of this year, was still in signs of emergency. >> question is, what is the taxpayer getting for their money today? >> you have a financial system that is more stable credit is more available. people can borrow at much lower cost and the taxpayer of the
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united states can see in the investment we made in the banking system returns in terms of actual billions of dollars. that anyone could see. >> how about an additional 2.5 million jobs lost, the highest unemployment 25 years, delinquencies and foreclosures up. it is a mixed report card at best. >> it is only now we're seeing positive growth for the first time. unemployment could stay high for some time. we are not close to being through this. but on the clearest direct measures of the program we were tasked with executing, we have made more progress than people reasonably expected. not enough yet, and we will keep at it. >> thank you. >> mr. silver?
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>> i want to take this from a different angle. i think one of your achievements, clearly yours, was to put an end to the fiction that all banks were equally healthy. i understand why that fiction was originally involved. i do not think it was done out of bad faith, but it was important to put an end to it. i think many of the characterization's of success that you indulged in with my colleagues are due to unwind and funds from strong banks. they pay them back a profit, and that was never worth the risk was imbedded, anyway. there was always some risk, but it was not there creeks or want to talk about some banks, and i hope he will indulge me.
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can you explain to meet what a zombie bank is and why it is dangerous? >> i do not use that term myself, because it does not mean anything. the risk is if you have a banking system without enough capital, they will have to reduce, if they delay a college education for their children, they hope think that is why it matters and it is a good use of policy and financial resources . >> an institution that is not insolvent, but too weak to land.
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is that accurate? >> i think you have the right concept. where are you going with this? >> where i am going with this is whether or not you like graphic terms, they sometimes have the ability to clarify things otherwise seem very mysterious. whether in your view, is city groups such an institution? >> no. >> why? >> this will not satisfy you, but i am not -- i cannot talk in this context and i will never talk about the detailed outputs for negligent institutions in our country, wherever they are. i want to return war i began, which is that the best test of whether these things are working is whether you are seeing private capital, private investors in this country willing to come in and provide capital to institutions, provide
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funding for them. and one of the great virtues of the stress test was it gave them a chance to make that choice and they basically have since voted with -- >> how can you be sure? i recognize that the cause and effect issues are real. but how can you be certain that what you did not to and the trust -- stress test was a signal that you will not be able to handle these banks, and there is no implicit guarantee, even though they remain at their court -- not really functioning institutions, were to use the graphic terms, zombies. >> again, you are right to point out that we did a range of other things besides just making it possible for private capital to come into these banks. instead of guarantee liquidity, they were important things,
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helpful for restoring confidence. but again, i think by any measure, you have a system that we have today that is in a smaller but stronger capacity, and that is the ultimate test of what we're trying to do. >> mr. secretary? >> i was going to ask you about wells. i will not spend time doing that, and you will not answer, and i understand what you think it would be inappropriate to be specific with respect to certain institutions. those three institutions are macroeconomic problems going directly to jobs. as this panel has gone to the country talking to people trying to create jobs, we hear over and over again that the various ways, depending on what it is, agriculture, real estate, large firms, small firms, we hear over and over again that the system
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is weak and the large institutions are not stepping up. >> i want to go back to the statute a little bit, because one of the provisions is an audit, and i think significantly it is not government accounting rules, but under gatt and gas, which will be interesting. they will have to get to some of these issues. it will have to do a balance sheet and that sort of thing, and it will have to look at costs. so my question is, first of all, has this been scoped out yet as far as the audit goes? where does that stand? >> i cannot do justice today, but i will get back to you in writing. i know we have something coming up which will include estimates of those measures, but in terms of the gao process, i did not
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know the details. i would be happy to have them get back to you or do it ourselves directly. >> ok. another issue that you brought up in your opening statement is regulatory change, that you all have proposed to congress. i guess coming from an independent agency, you know, i value that sort of tradition of independence from the administration, and earlier this year, there were reports of the press about what i would term as excessive pressure from the administration, especially your colleagues on the business working group and elsewhere. i wonder where that stands as far as you're concerned, as far as dealing with others as independent agencies. now part of the administration, of course. and how you view your
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interaction. >> actually believe there's a lot of agreement on the things we try to achieve. and in broad structure, with the framework of derivatives we put out, you can see it in terms of core provisions of capital. you heard us a couple of weeks ago. there is a broader criminal crossed those agencies on reforms -- a broad agreement across those agencies on reforms. there are areas where they prefer we leave existing authority. if you have heard from them in public, the focus of some concerns has been where we propose to take authority from them and put it in a different place. most conspicuously in the area of consumer credit protection, where by any measure, to put in
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a stronger system you have to put a single entity in, with both the authority to write rules and enforce them. i think that is the best example of where there is still disagreement, and you would expect it. nothing surprising about that. >> i guess we can have another chance to talk about these particular is later on. with respect to the programs under tarp, do you have any expectation of expanding list to have now? >> we tried to provide targeted support for credit markets the search for recovery -- necessary for recovery, and a broad framework in those areas. that was our best judgment at the time about what it would take. we wanted to have some capacity to modify and adapt those overtime to make sure they were
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doing what they needed to do. at this stage, we do not have any specific plans to substantially expand the scope, and areas we would target, but it is possible that, looking at the damage in the system remaining, we might make that judgment. but we would want to set a high are doing so because we would want to demonstrate to you that that is an appropriate use of taxpayer money in terms of the returns that we are going to get. >> another issue is whether tarp is a revolving arrangement, with the money available for the future. do you have a legal analysis of this? >> we provided extensive responses with how we interpret the authority, and i think there is broad acceptance, "the view" in the congress by the architects of that legislation that the way it works is this.
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if it comes back, if the dollar comes back and substantial billions come back from the financial system, that goes directly to the general fund to reduce debt outstanding. but all was still the best authority to use that if we think we need to do it to help protect the system. >> i would like to see some analysis. >> happy to do that. >> thank you. >> your proposal includes merger of the occ and 02 yes, and i support that change. some, including the largest banks, proposed going further, creating a single monolithic regulator raising serious concerns. creating single regulators as a means of improving financial regulation relies, in my opinion, on the faulty
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assumption that consolidation leads to a stronger and safer banking system itself. in my opinion, the opposite is true. such a proposal would increase the fragility of the system by increasing industry consolidation, eliminating needed checks and balances, and subordinating the interest of consumers to the business goals of a handful of banks. my experience, multiple regulators yield better results for consumers and financial stability, much like multiple judges are used in the olympics to arrive at the right score. what are your concerns about the proposals created for a single monolithic regulator, and how important was it for you drafting your proposal that the fdic and federal reserve retain authority to better inform their respective missions of composite insurance and lender of last resort? >> that frame the choices roughly.
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one thing we had to do was to eliminate the opportunity for people to take advantage of weaker supervision and flip their risk. one of the principal examples, unfortunately, was in the difference between thrifts and banks. we thought that was an absolutely essential condition to reform, eliminating that. if you look ahead, there is less evidence that having the system we have, with two entities responsible for different types of chartered banks alongside a single federal supervisor would create really meaningful risk arbitrage and future critical look at the standard by bank supervisors in general or even applied or more effectively enforced, we do not think it was necessary or desirable to try and force all of that into one
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new entity, probably because of the concerns about concentrated power and having congress do a lot in the short time, and the guiding principle affecting our choice was to sit and we wanted to focus on things that were essential, and not those that were desirable but would not offer a@@@@@@" further dramatic consolidation of bank supervisors we didn't think met that test we are open to suggestions and if there is will in the congress and interest in going forward with consolidation, we would be happy to be supportive of that. i figure it to balance the factors that you laid out in your comment. >> you share my concerns over the role of the checks and balances that i often use as an example, the role of the independent fdic and raising issues of the importance of the leverage ratio in the regulatory
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scheme? >> there is virtue in multiple pairs of eyes looking at these institutions. competition creates risks to. we did not get the balance right. we had to fix the weakest parts of the problem. we would be open to suggestions how to get that balance better. >> thank you. a.i.g. has received about $70 billion in end $100 billion from the fed. do you know where the money went? >> absolutely. the money in that context went to help stabilize institutions fatwood have post, we think, very substantial risk of systemic failure.
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>> maybe i should ask with more specificity. were treasury's aware of the parties that would receive payment in full on the credit defaults what? -- swap? >> they have hundreds of thousands of parties. i'm sure the supervisors and the people at the fed on the front lines had detailed access. i think they could have known. whether they knew at that time, i'm not sure they knew it. but of course it would have access to that. >> about the members -- >> many of the counterparties are institutions, supervised all the time -- >> but they were holding pieces of paper from an entity that is clearly insolvent, and the
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question of the government infusion of dollars there would make the difference between whether they got paid off in full or ended up with nothing. >> right. but let me finish. what would you like to know? >> i just want to know, did treasury have conversations with the parties who ultimately profited? >> i do not know. i was at the new york fed and central to the basic judgment we reached together to prevent g e, and your right to point out that that action did help make the station more stable, including the direct penalties. but one more thing, to the premise of your question, the reason why aig posed systemic risk was not because of the direct exposure of those
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institutions, those counter parties. the biggest risk of failure to the system is in the damage it would have done to both retail people who bought insurance protections from aig, as well as the type of risky saw lehman present. is a more complicated picture. >> we just finished our report, chrysler and gm insolvent, aig insolvent. they have secured creditors and employees and all took big hair cuts. aig had people hold their credit defaults swaps. we took no hair cut at all. they give us money from the federal government, 100 cents on the dollar, and i have to understand what they are different from one another. >> that is the tragic failure, because we did not have the legal capacity to manage the orderly unwinding of a large,
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complex financial institution. we do have a capacity for small banks and thrifts, but not aig, said that forces us to do things that we would not normally do. we would have done in a second if he could have done that, but in deciding that, we would have presented the risk of further systemic damage to a fragile system. by preventing default, we help them meet the immediate obligations, not just for insurance protection, but for broad counterparties. that is the consequence of that. and if you think through what happens when you let the default happen, you can look at the wake of the trauma caused by lehman's to fall to get a sense of the damage second cost, and that is
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why -- you can look at their default to see the damage that cost. and that is why we're working at better tools for the future. >> a year ago, we were worried about banks being too big to fail. but they have gotten bigger in the last year, and some experts estimate that a thousand banks could disappear before this crisis is over. are we more at risk than a year ago? >> i do not think so, but it depends largely on what congress ultimately decides to do it termed the financial reform. -- in terms of financial reform. the only way to deal with the problem is to make sure there are a set of reforms in place that make us better able to withstand the failure of large institutions so we do not have
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to intervene to protect her money at risk to prevent them from more orderly resolution, and that requires more authority, stronger capital, a whole set of cushions and safeguards that limit the risk of contagion is spreading, and that is what reform is so important, and that is the only way to make a system safer for future failure. >> thank you, madam chair. mr. secretary, i continue to be concerned with the chrysler and general motors intervention, and you are well acquainted with the facts and reorganizations. gm and other bondholders were asked to swap 27 billion in debt for 10% common equity. the uaw agreed to swap 20 billion for 70.5% of common equity, 9 billion in pervert --
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preferred stock, ending up with 55% of chrysler, 17.5% of gm. when you talk about the success of your administration in stabilizing the financial markets, i'm very concerned about how with senior secured bondholders go, we see the uaw receive preferential treatment. warren buffett said if priorities do not mean anything, that will disrupt lending practices. that would have consequences. the wall street journal, some would say the investor journal, wrote an op-ed-in may, saying
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that by stepping over the arbitrary behavior of men, president obama may have created 1000 new failing businesses that could have received financing before but now will not, since lenders pace -- faced potential confiscation. this undermines the reason for buying a bond at all, except a lower return to exchange for legal guarantees that will in turn reduce the willingness to buy bonds. that seems anecdotal. when i speak to investors, i believe there are hundreds of billions of dollars sitting on the sidelines, not knowing what the policy is, concerned about the potential to confiscate their investments. i have small businesses throughout the fifth district that tell me they cannot get lines of credit. so i know there is a huge stabilization.
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i'm not sure there is a lot of improvement, and i question what precedent you have set and what the impact is for financial stability in treating the uaw so differently than creditors were equal. >> i know you have had testimony in this before, and i understand your concerns. many people have raised them for some time. but this was a process overseen by a bankruptcy judge. that looked at the terms of the agreement and reached a judgment about whether it was acceptable. >> it was financed under tarp. >> and i know you oppose the action, which i understand. but we took this action because we thought it was important and
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effective to do in the face of this crisis and recession, and i think this will be judged as an exceptionally well divine -- well-designed dramatic restructuring. it goes well beyond that which was contemplated by members of this congress. >> another aspect i do not understand is how fiat is brought into the deal. 20% of chrysler, up to 35% if they produce cars that receive 40 miles to the gallon. i know the president and administration are passionate about their global warming agenda. we can have that debate. but i am having trouble finding out why fiat, who was not owe it does live -- who does not owe a
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dime, " having them use taxpayer money to produce these cars in the future had anything to do with protection our financial stability. i just do not get it. >> i respect what my predecessor did in the automobile industry, but companies are not forced to. it is the use of what congress did best. >> bank. mr. silvers. thank you. >> my colleague appears to be under the misapprehension that you are in bankruptcy judge. >> last time you asked if i was an investment banker, and i said no. but i have also never been a bankruptcy judge. >> the term banker does seem to apply to the federal reserve bank of new york.
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>> that would be stretching the definition. >> is not a bang? -- is not a bank? -- it is not a bank? never mind. a provider of financing makes strategic decisions about how they want the money to be used, right? i assume the treasury would, as well. >> yes, and we did what was best for the taxpayer, and those judgments were overseen by a bankruptcy judge. >> let me move on. you made some references to regulatory reform. one criticism of a program which i believe is a serious and positive program put up by the illustration is the criticism that it does not really deal
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with what structurally went wrong in our banking system and markets in that it does not deal with the combination and risk associated with investment banking, and in particular proprietary trading, combined with insured deposits. i am particularly concerned about this problem because of, to go back to my prior questioning, the zombi bank problem. if you have weak financial systems with an explicit guarantee that has not been dissolved, they are very weak, there's a temptation to gamble that is almost irresistible. can you comment on how this will be addressed in the program? >> >> we have to make sure that
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there is insurance against risks for the future. it is like a rainy day fund, that they can draw on. @@@@@@@ @ @ @ @ @ @ @ @ @ @ @ @% if one institution faces the risk of failure and that is the centerpiece of reform we laid out last week in proposals for reforming capital standards. if you insure that these institutions hold more capital against risk they take, in whatever form, and there is more capital held against most risky activities, it is probably the most important thing we can do against the risk you are printing. if we had adopted a strategy of guaranteeing the liabilities of the financial system, not forcing recapitalization, not conditioning our assistance on a dramatic restructuring, then i would be more worried about the
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risks that you refer to. that is not the strategy we adopted. >> roprietary trading desk is consistent with allowing -- consistent with being part of the holding company that has significant insured deposits, as a wise form of public policy? >> you should hold capital against risk you take. we will be looking at this crisis for a long time. most of the losses that were material for the weak and strong institutions have not come from those activities. they came overwhelmingly from what you could describe as classic extensive credit, particularly where they are backed by real estate, and those classic banking decisions -- and this is the crisis -- >> if you look at where the holes came in the commercial banks, they were substantially
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-- i give one example. we did not make any subprime loans. at the capital markets desk, they were in the business of repackaging other vehicles. do you disagree with that as a characterization of how we got there? >> these were extensions of credit. if firms were not forced to hold capital, we will be vulnerable again. we are not want to let that happen. >> i'm glad you have confidence in capital, but even with the levels you were talking about, it would not have prevented what went on last year. so some of it is flying by the
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seat of your pants, ultimately. one of the central things is predictability, because as he talked about aig, if you go back, it is a debate for a different time. but turning around to freeze up the marketplace, people are concerned. but i want to get to the public- private program to get to where that stands. the two basic programs and the loan programs. the legacy in security program is one that has been going, and i'm wondering where that stands, how many purchases have been made, and if you view these as bible and the great scheme of instruments out there
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-- viable in the great scheme of instruments out there? >> we selected to raise capitals. all of them are raising a lot of interest. soon, there will be a position where they are buying securities in the market. but you saw when details were put out a pretty significant effect on prices. the prospect of financing capital coming in did help improve liquidity in the markets. so as you saw before, we expect less demand for these facilities and was initially expected, in part because liquidity has improved, in part because more capital came into the financial system. but i think it is worth going over, and if there's a high return, then we would be open to expanding further.
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>> i think we can say that for another day, and your time is short. i will give him an activity, as well. >> you're right to say that if you look back over the arc of the crisis, one damaging thing was the lack of clarity over whether the government would step in and stabilize the system. but to be fair, it was largely the consequence of the fact that until congress acted, the government of the united states did not have the authority to step in and provide capital, and only with that authority and subsequent actions were we able to have the tools necessary to stabilize this thing. clarity about strategy matched by resources and authority is
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central to confidence. and this crisis was more damaging and prolonged because of the constraints put on, and that is something we have to fix. we cannot go into a position where we put ourselves to the next potential risk with that limited set of tools. that is why the authority is so important. >> i am not sure that your proposals will do that, actually. i think they raise other issues with the systemic regulator. it could be an issue for another time. >> again, we welcome the chance to talk in more detail about it, and we do not claim a monopoly of wisdom. we expect our approvals to be refined as they go through congress. but one thing to recognize is that we cannot go back to where things were with that much risk
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and so few tools. >> we're down to our last question. >> ipod the administration for taking the long steps with respect to financial services. i share this commitment to protection, and strongly agree with your proposal to empower states for consumer protection, particularly by karen tiring -- by guaranteeing. but first, i have a fundamental concern about safety and soundness. these are not conflicting missions. isn't one of the primary reasons that a loan that is unfair is not a safe and sound love? doesn't that lesson argue for greater integration of the two
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disciplines into a holistic approach to supervision, rather than further segregation? i would also question whether it is necessary to create a new organization, with all of the unintended consequences it would bring, or whether expanding an agency like the federal trade administration, which its strong track record, may have a better ability to expand the goals of regulatory reform without creating new bureaucracies and costs. my question to you is what thought, if any, was given to alternatives, such as expanding the position of the reserve board or expanding the jurisdiction of the ftc or a similar agency that could better protect consumers and not create new bureaucracy? >> we looked at a lot of models and thought about the concerns you expressed. we have been living as a country
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with a system where we gave bank supervisors the primary responsibility, and how did that turned out -- turn out? it did not work. it has failed in its most basic mission, and the reasons were complicated, but i think we had a test of the viability of the model that combines the authority for provisions for protection and the judgment we reached was based on experience over many decades, several recessions, past crises, that you need to put authority in a single place with the resources. by clarifying where authority is, we will not be adding to the overall authority of the system. ftc has a great job and a lot to do.
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and in credit, it is very, very hard. looking at the best path forward, but i understand why you are a supervisor and why many supervisors look at the prospect of a different model and can be uncomfortable with the implications of change. but i think the rules would be poorly written. >> but you do take strong action with respect to mortgages? >> i agree with you, and they provide reforms in the mortgage area, as well. but he said the important thing. when did those rules,? the federal reserve was directed to have the governor on board?
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>> we have to make a gesture with congress about what will be most effective, and we have had a painful experience which gave those entities responsibility for rules and enforcement, and it was a damaging failure. some of the most damaging things happened outside banks, and part of the failure of the system was not to provide bigger protections, and that is the centerpiece of what we propose. let me move on to another area that is arguably not getting as much attention, and that his products suitability and effective disclosures. consumers and investors new disclosures, not just more pages of print. for example, made the suggestion of a nationally recognized rating system to communicate chronic safety and complexity, perhaps along with a one page or
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two page summary. i often compare this to the system on ski slopes. when i am on top of the mountain, i cannot imagine screaming without a green, red, or double diamond. >> when you compare that to the recommendations we made, we're open to suggestions about how to get it better. >> we are out of time. >> i heard you, and we will try to respond. we will do as much as we can make sure you have good representation. thank you. >> thank you very much, mr. secretary. we appreciate you being here and giving detailed answers to your questions, and we look forward to seeing you soon. >> thank you very much. >> thank you very much.
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[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> the supreme court heard oral argument on campaign finance. the first session for justice sonia sotomayor. >> wouldn't we be doing more harm than good by a broad ruling in a case that does not
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involve for business corporations and does not involve the traditional nonprofit corporation? >> pierre the argument in its entirety, saturday on c-span. starting october 4, an extensive look at the role, traditions, and history of the court permits justices during supreme court week. >> coming up today on c-span, "washington journal" is next with your phone calls. participants for the 9/11 memorial park president barack obama and ordered gates. -- robert gates. >> in about half an hour, we

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